DEPUTY COMMISSIONER OF INCOME TAX, TRUST CIRCLE- 3(1), BANGALORE vs. M/S. BALDWIN BOYS HIGH SCHOOL, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No. 606/Bang/2001 Assessment Year : 1997-98 The Deputy M/s. Baldwin Boys Commissioner of High School, Income Tax, No. 14, Hosur Road, Trust Circle 3(1), Richmond Town, Bangalore. Bangalore – 560 025. Vs. APPELLANT RESPONDENT Assessee by : Shri V. Srinivasan, Advocate : Shri Priyadarshi Mishra, Revenue by Addl. CIT (DR) Date of Hearing : 09-02-2022 Date of Pronouncement : 24-03-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal has been filed by the revenue against order dated 30/03/2001 passed by the Ld.CIT(A)-II, Bangalore for assessment year 1997-98. 2. Brief facts of the case are as under: It is submitted that originally this appeal was dismissed by way of common order passed by this Tribunal dated 28/08/2019 for low tax effect. Subsequently, the revenue filed a miscellaneous petition alleging that the tax effect involved in the appeal is above the monetary limits and the appeal was accordingly restored for being disposed off on merits by order dated 04/12/2020.

Page 2 of 19 ITA No. 606/Bang/2001 3. At the outset the Ld.AR submitted that assessee has filed application under Rule 27 raising a legal issue that reads as under: “1. The assessment is void at initio being violative of the mandatory provisions of section 143(2). 2. The learned A.0 erred in holding that the assessee is not entitled to exemption u/s 10(22) without proper legal basis and and on grounds not sustainable in law. 3. Assuming that there is taxable income, interest charged u/s 234 A & B is not in accordance with law as laid down by the apex court in RANCHI CLUB LTD 164 CTR page 200.” 4. The Ld.AR submitted that, above issues goes to the root cause of jurisdiction of present appeal and assessee has a right to raise such issue under Rule 27 of the Income Tax Rules, 1963. The Ld.AR place reliance on the decision of Hon’ble Delhi High Court in case of Sanjay Sawhney v. Pr. CIT reported in (2020) 116 taxmann.com 701 in support of his contention. On the contrary, the Ld.SR.DR submitted that the assessee cannot be permitted to take away the benefit that accrued in favour of Revenue, except by way of an appeal or cross objections. He submits that an order adverse to the interest of revenue, by recourse to Rule 27 is impermissible as held in the aforesaid judgment. The Ld.Sr.DR submitted that, since the assessee did not prefer any cross appeal or objections, it cannot now be permitted to urge jurisdictional ground in the manner the assessee has approached this Tribunal. In support he placed reliance on the Hon’ble Ahmedabad Tribunal in case of DCIT vs. Sandeep M Patil reported in (2012) 137 ITD 104.

Page 3 of 19 ITA No. 606/Bang/2001 We note that the decision relied by the Ld.Sr.DR by Hon‘ble Ahmedabad Tribunal has not considered the view taken by the, Hon’ble Gujrat High Court in case of Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT reported in (2005) 149 Taxman 456. Hon’ble Court observed as under: "17. Taking up the second issue first, the Tribunal has committed an error in law in holding that the assessee having not filed cross-objection against findings adverse to the assessee in the order of Commissioner (Appeals), the said findings had become final and remained unchallenged. The Tribunal apparently lost sight of the fact that the assessee had succeeded before the Commissioner (Appeals). The appeal had been allowed and the penalty levied by the assessing officer deleted in entirety. In fact, there was no occasion for the assessee to feel aggrieved and hence, it was not necessary for the assessee to prefer an appeal. The position in law is well settled that a cross objection, for all intents and purposes, would amount to an appeal and the cross objector would have the same rights which an appellant has before the Tribunal. 18. Section 253 of the Act provides for appeal to the Tribunal. Under sub-section (1), an assessee is granted right to file an appeal; under sub-section (2), the Commissioner is granted a right to file appeal by issuing necessary direction to the assessing officer; sub-section (3) prescribes the period of limitation within which an appeal could be preferred. Section 253(4) of the Act lays down that either the assessing officer or the assessee, on receipt of notice that an appeal against the order of Commissioner (Appeals) has been preferred under sub-section (1) or subsection (2) by the other party, may, notwithstanding that no appeal had been filed against such an order or any part thereof, within 30 days of the notice, file a memorandum of cross objections verified in the prescribed manner and such memorandum shall be disposed of by the Tribunal as if it were an appeal presented within the period of limitation prescribed under sub-section (3). Therefore, on a plain reading of the provision, it transpires that a party has been granted an option or a discretion to file cross objection. 19. In case a party having succeeded before Commissioner (Appeals) opts not to file cross objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or the part thereof which was against the respondent. The Tribunal has, in the present case, unfortunately drawn such an inference which is not supported by the plain language employed by the provision. 20. If the inference drawn by the Tribunal is accepted as a correct proposition, it would render Rule27 of the TribunalRules redundant and

Page 4 of 19 ITA No. 606/Bang/2001 nugatory. It is not possible to interpret the provision in such manner. Any interpretation placed on a provision has to be in harmony with the other provisions under the Act or the connected Rules and an interpretation which makes other connected provisions otiose has to be to avoided. Rule27 of the Tribunal Rules is clear and unambiguous. The right granted to the respondent by the said Rule cannot be taken away by the Tribunal by referring to provisions of Section 253(4) of the Act. The Tribunal was, therefore, in error in holding that the finding recorded by the Commissioner (Appeals) remained unchallenged since the assessee had not filed cross objections." We note that the above view has not been followed by the Hon’ble Tribunal though was relied on by the assessee. We have further observed that subsequently following the coordinate bench view , Hon’ble Gujarat High Court in case of PCIT vs.Sun Pharmaceuticals Ltd reported in (2017) 86 taxmann.com 148 observed as under: 10. The contention of the counsel for the Revenue was that the assessee had to file independent appeals or cross-objections in terms of section 253 (4) of the Act to enable the assessee to raise the ground of validity of the notices for reopening of the assessments since the said ground was held by the Commissioner (Appeals) against the assessee. For multiple reasons, we cannot accept this contention. As noted, under sub-section (1) of section 253, an appeal can be filed before the Appellate Tribunal by an assessee being aggrieved by the order of the Appellate Commissioner. Under sub-section (2) of section 253, only if the Principal Commissioner or the Commissioner objects to any order passed by the Appellate Commissioner, he would direct the Assessing Officer to file appeal before the Appellate Tribunal. Essentially therefore, an appeal before the Tribunal against the order of Appellate Commissioner would lie against an order which is adverse to the appellant. May be, on one out of two grounds if the appeal of the assessee is allowed by the Appellate Commissioner in its entirety, he cannot be stated to be a person aggrieved by such order. His appeal under sub-section (1) of section 253 would not be maintainable. The assessee cannot file a standalone appeal challenging a finding of the Appellate Commissioner which may be against the assessee as long as the appellate order of the Commissioner is entirely in favour of the assessee and no part of the appeal of the assessee's claim is rejected. Under sub-section (4) of section 253, it is open for a person either an Assessing Officer or, the assessee, upon receipt of a notice of the appeal filed before the Tribunal to file cross-objection against any part of the order of the Commissioner (Appeals) and such cross-objection would be dealt with by the Tribunal as if it were an appeal presented within the time specified. Two things thus become clear. A cross-objection under

Page 5 of 19 ITA No. 606/Bang/2001 section (4) of Section 253 could be directed against any part of the order of the Appellate Commissioner and if so presented, it would be disposed of by the Tribunal in the manner an appeal would be decided. In other words, such cross-objection would have independent existence even if for some reason, the appeal of the opponent does not survive. The cross-objection could be filed only against any part of the order of the Appellate Commissioner and necessarily therefore, that part of the order of the Commissioner (Appeals) has to be adverse to the person raising the cross-objection. Rejection of a ground, an argument or a contention would not come within the expression "any part of the order of the Commissioner" in context of which, the said phrase has been used in sub-section (4) of section 253. 11. To put the controversy beyond doubt, Rule27 of the Rules makes it clear that the respondent in appeal before the Tribunal even without filing an appeal can support the order appealed against on any of the grounds decided against him. It can be easily appreciated that all prayers in the appeal may be allowed by the Commissioner (Appeals), however, some of the contentions of the appellant may not have appealed to the Commissioner. When such an order of the Commissioner is at large before the Tribunal, the respondent before the Tribunal would be entitled to defend the order of the Commissioner on all grounds including on grounds held against him by the Commissioner without filing an independent appeal or cross-objection. 12.Rule27 of the Rules is akin to Rule 22 Order XLI of the Civil Procedure Code. Sub-rule (1) provides that any respondent, though he may not have appealed from any part of the decree, may not only support the decree but may also state that the finding against him in the Court below in respect of any issue ought to have been decided in his favour; and may also take any cross-objection to the decree which he could have taken by way of an appeal. In case of Virdhachalam Pillai v. Chaldean Syrian Bank Ltd.AIR 1964 SC 1425 in context of the said Rule the Supreme Court observed as under: "32. Learned Counsel for the appellant raised a short preliminary objection that the learned Judges of the High Court having categorically found that there was an antecedent debt which was discharged by the suit-mortgage loan only to the extent of Rs. 59,000/- and odd and there being no appeal by the Bank against the finding that the balance of the Rs. 80,000/- had not gone in discharge of an antecedent debt, the respondent was precluded from putting forward a contention that the entire sum of Rs. 80,000/- covered by Exs. A and B went for the discharge of antecedent debts. We do not see any substance in this objection, because the respondent is entitled to canvass the correctness of findings against it in order to support the decree that has been passed against the appellant."

Page 6 of 19 ITA No. 606/Bang/2001 13. Likewise, in case of S. Nazeer Ahmed v. State Bank of Mysore AIR 2007 SCW 766 it was held and observed as under: "7. The High Court, in our view, was clearly in error in holding that the appellant not having filed a memorandum of cross- objections in terms of Order XLI Rule 22 of the Code, could not challenge the finding of the trial court that the suit was not barred by Order II Rule 2 of the Code. The respondent in an appeal is entitled to support the decree of the trial court even by challenging any of the findings that might have been rendered by the trial court against himself. For supporting the decree passed by the trial court, it is not necessary for a respondent in the appeal, to file a memorandum of cross-objections challenging a particular finding that is rendered by the trial court against him when the ultimate decree itself is in his favour. A memorandum of cross-objections is needed only if the respondent claims any relief which had been negatived to him by the trial court and in addition to what he has already been given by the decree under challenge. We have therefore no hesitation in accepting the submission of the learned counsel for the appellant that the High Court was in error in proceeding on the basis that the appellant not having filed a memorandum of cross-objections, was not entitled to canvass the correctness of the finding on the bar of Order II Rule 2 rendered by the trial court." ……………… 15. The first question is, therefore, answered against the Revenue and in favour of the assessee. Therefore in we refrain from commenting on the decision relied by the Ld.Sr.DR. We have perused the submissions advanced by both sides in light of records placed before us. 5. Before adverting to the scheme of filing appeals envisaged under the Act as well as Rules, it is necessary to understand the facts that lead to the filing of application under Rule 27 before this Tribunal. 5.1 For the year under consideration, the respondent assessee had not filed its return of income. Thereafter, the Ld.AO reopened the assessment by issue of the notice u/s.148 of the Act, dated 08/01/1996 and 30/03/1998 calling for the return of income. The respondent assessee had filed the Nil return on 21/09/1999

Page 7 of 19 ITA No. 606/Bang/2001 and thereafter, the Ld.AO concluded the assessment proceedings by the order passed u/s.143[3] rws 147 of the Act, on 27/03/2000 in which the exemption claimed by the assessee u/s. 10[22] of the Act, was denied and taxable income of Rs.1,30,06,240/- was determined. 5.2 It is submitted that before passing the assessment order on 27/03/2000, the Ld.AO did not issue the mandatory statutory notice u/s.143[2] of the Act, selecting the case for scrutiny assessment and this is manifest from the assessment order itself, though the same is mentioned in the Assessment order having issued to assessee. 5.3 Aggrieved with the assessment order passed, the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) by the impugned common order dated 30/03/2001 held that the assessee was entitled to exemption u/s. 10[22] of the Act. Being aggrieved with the said relief granted by the Ld.CIT(A), the revenue filed present appeal before the Hon'ble Tribunal. 5.4 The Ld.AR submitted that the assessee raised additional ground of appeal before the Ld.CIT(A) which is noted in para 3.2 of the impugned order. He submitted that one of the additional grounds raised was with regard to the validity of the impugned assessment order framed u/s.143[3] rws 147 of the Act, without issuance of the mandatory notice u/s.143[2] of the Act. The relevant grounds of appeal raised before the learned CIT[A] is reproduced hereunder for the sake of immediate reference: “1. The assessments are ab initio void being violative of the mandatory provisions of section 143[2]."

Page 8 of 19 ITA No. 606/Bang/2001 He submitted that the Ld.CIT(A) disposed off this additional ground by observing as under: "4.3 After careful consideration of the submissions of the learned AR and the facts of the case, I am unable to agree with him for the following. Unlike in the case of the notice u/s.156 where the format is prescribed, there is no fixed format for issue of notice u/s.143[2]. All that the section 143[2] says is that "the AO may serve on the assessee a notice requiring him, at a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return". The requirement is therefore that a date is to be fixed for the assessee to attend the office or to furnish the relevant evidence which the assessee may have in support of his claim. On going through the facts of the case, I find that this requirement has been met by issue of notice u/s.142[1] on various dates in a letter form requiring the appellant to furnish various details in connection with the returns filed by the appellant and to explain the various issues relating thereto. The date and time of hearing was also mentioned in such notices issued by the AO. In response to such notices, it is also seen the appellant has appeared before the AO from time to time to explain the returns and such appearances have been recorded in the order sheets. In view of the above, I am of the considered opinion that the legal requirement of issuance of notice u/s.143[2] has been duly complied with by the AO and therefore there is no violation of any mandatory provisions of the Act. Accordingly, the ground taken by the appellant is dismissed". It is the submission of the Ld.AR that the aforesaid view taken by the Ld.CIT[A] is erroneous and contrary to the settled provisions of law. Reliance is placed on the judgement of the jurisdictional High Court in the case of H.GOUTHAMCHAND reported in 44 ITCL 163 [Kar] wherein, it has been held that an order passed u/s.143[3] without issuance of notice u/s.143[2] of the Act, is void-ab-initio. The Revenue has filed appeal with regard to the impugned order of the learned CIT[A] holding that the respondent was entitled to

Page 9 of 19 ITA No. 606/Bang/2001 the exemption allowed u/s.10[22] of the Act, by the learned CIT[A]. However, the additional ground raised by the respondent with regard to the validity of the assessment for non-issue of notice u/s.143[2] of the Act, has been decided against the respondent and no appeal or cross-objection has been filed since, the respondent had secured relief on merits of the claim u/s. 10[22] of the Act. Nevertheless, the respondent now wishes to urge and support the order of the Ld.CIT(A) dated 30/03/2001, in terms of Rule 27 of the Appellate Tribunal Rules, since the very assessment order passed by the A.O. without issuance of notice u/s.143 [2] is a nullity. 6. At this juncture, it would be apposite to first decide about the maintainability or otherwise of application under Rule 27 of ITAT Rules, 1963. Rule 27 is reproduced and reads as under: “Respondent may support order on grounds decided against him. 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” 7. On plain reading of the above rule it is clear that the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. The effect of this rule is that a respondent has been entitled to support the order on the ground which has been decided against him. The underlying idea and the spirit of Rule 27 is to arm a respondent, in an appeal filed by the plaintiff, with an option to contest unfavourable decision by the Ld.CIT(A) on the

Page 10 of 19 ITA No. 606/Bang/2001 aspect/(s) of an issue, the final decision on which issue has been delivered in his favour. 8. The mandate of Rule 27 is to be seen in contradistinction to the provisions of section 253(4) of the Act, which empower the respondent, on an appeal filed by the plaintiff, to file cross objection against an assessee. At this stage, it may be fruitful to take note of the prescription of sec. 253(4), which provides that : Section 253…… (4)The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) or the Assessing Officer in pursuance of the directions of the Dispute Resolution Panel has been preferred under sub-section (1) or sub- section (2) or sub-section (2A) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Assessing Officer (in pursuance of the directions of the Dispute Resolution Panel) or Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3) or sub-section (3A).' The above section provides a right to the respondent to file cross objection in Form No.36A. The need to file cross objection may arise where the Ld.CIT(A) allowed part relief to the assessee or dismissed some legal issues raised by assessee, then the assessee may file cross objection in respect of such issues decided against when the assessee receives notice of filing appeal by the revenue against such order passed by the Ld.CIT(A). This is an additional right to the assessee and revenue to raise grievance before the Tribunal. The question of filing an appeal or cross objection would arise to the assessee/revenue, only when certain issues are decided against the respondent, and the respondent has not filed appeal under section253(1).

Page 11 of 19 ITA No. 606/Bang/2001 9. Thus when we consider Rule 27 of the ITAT rules in juxtaposition to sec. 253(4) of the Act, the position which emerges is that where Rule 27 is a remedy to the respondent to `support' the ultimate favourable conclusion of the Ld.CIT(A) by challenging such aspects of the issue which were decided against him, a cross objection under section253(4) of the Act is a remedy to the respondent to challenge the ultimate unfavourable conclusion of the Ld.CIT(A). 10. In our view, the term "ground" in the expression "….may support the order appealed against on any of the grounds decided against him" does not refer to grounds raised in memorandum of appeal or additional grounds before the Tribunal, but refer to ground raised before Ld.CIT(A) by the assessee, which has been decided against the assessee by the Ld.CIT(A). 11. Thus this Tribunal has discretion to allow any party to the appeal, may be the appellant or the respondent, to raise a new point or a new contention provided following two things are satisfied:  First, that for urging such a new point no new facts are required to be brought on record and the point is capable of being disposed of on the facts which are already on record and,  Second, an opportunity is given to the other side to meet that point that is being allowed to be raised for the first time in appeal. 12. Rule 27 of ITAT Rules provides an opportunity to the respondent where he has not filed any appeal or cross objection before the Tribunal, to support the order of Ld.CIT(A) on a ground

Page 12 of 19 ITA No. 606/Bang/2001 decided against by the Ld.CIT(A). However, the respondent cannot seek more relief under Rule 27, then what is allowed and settled because of respondent having not preferred any appeal or cross objection. There are no fetters in raising legal issue under Rule 27, like that of jurisdiction for reopening or for initiating assessment under section153A/153C provided full relief on quantum is already allowed by the CIT(A). This view is supported by the decision of Hon’ble Delhi High Court in case of Sanjay Sawhney v. Pr. CIT reported in (2020) 116 taxmann.com 701. Hon’ble Court after considering plethora of cases, held as under: 18. Mr. Hossain, relying on Edward Keventer (supra) argued, if the additional grounds raised by the assessee under Rule 27 were examined and allowed by the ITAT, the revenue would be left in a worse off position than it was before filing of the appeal. He submits that since the assessee had not assailed the order of CIT(A), it has attained finality qua him. Now, the assessee cannot be permitted to take away the benefit that accrued in favour of Revenue, except by way of an appeal or cross objections. He submits that an order adverse to the interest of revenue, by recourse to Rule 27 is impermissible as held in the aforesaid judgment. 19. We are of the view that Mr. Hossain's reading of the aforementioned Judgment is flawed. He is misconstruing the language employed in section 254 (1) of the Act (corresponding to section 33(4) of the Indian Income-tax Act 1922). The word 'thereon' used in section 254 (1) of the Act, gives power to the Appellate Tribunal to pass such orders thereon as it thinks fit, implies that the tribunal would confine itself to the subject matter of appeal only. Under Rule 11 of the ITAT Rules, an appellant can, by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, and the Tribunal, in deciding the appeal, would not be confined to the grounds set forth in the memorandum of appeal. This, however, does not mean that the Respondent is prevented from supporting the judgment on the grounds decided in his favor, or by assailing the aspect decided against him. Accepting Mr. Hossain's submission would mean that subject matter of the appeal is circumscribed and is confined only to the grounds urged by the Appellant. Firstly, the subject matter of an appeal is not be construed narrowly, as already observed above. Subject matter is "comprehended as to encompass the entire controversy between the parties which is sought to be got adjudicated upon by the Tribunal". Secondly, if jurisdictional objection under Rule 27 is gone into

Page 13 of 19 ITA No. 606/Bang/2001 by the Tribunal, albeit raised by resort to Rule 27, it cannot be said that the subject matter is expanded under the guise of the said provision. It cannot be said that Respondent is taking away benefit that could be said to have accrued in favour of the Appellant before the Tribunal. The jurisdictional question is not an independent issue that can be reversed only by way of an appeal or cross objection. We do not find any merit in the submission of Mr. Hossain. 20. Having analyzed the judgments relied upon by the Revenue and not finding same to be of any assistance to the Revenue, we now proceed to examine the legal position that emerges from a plain reading of the provision in question. In fact, we feel the controversy sought to be raked up by the Revenue to deprive the Appellant [ Respondent before ITAT] an option to raise jurisdictional grounds of objection is completely misplaced. If we refer to Rule 27 of ITAT Rules, 1963, a bare reading thereof manifest that a Respondent has a right to support the impugned order, without having filed any cross appeal or cross objection. This understanding emerges from the language of the said provision which begins with the words "The Respondent, though he may not have appealed,". This means that the provision is to enable a Respondent to effectively defend the order appealed before the Appellate forum. The expression "though he may not have appealed" also indicates that the provision is to be resorted to in a situation where a Respondent may otherwise have a right to file an appeal or cross objections, but has chosen not to avail of this remedy. Thus, a party who has not availed of the option of filing an appeal, in a given situation, if arrayed as a Respondent before the Appellate Tribunal, can rely upon Rule 27, to support the order under appeal. The aforesaid expression also suggests that recourse to Rule 27 would only be available in case the remedy of appeal is otherwise available with the Respondent, and he has elected not to avail the same. In other words, in case a Respondent would not have such a right [of filing a cross appeal or cross objection], then he would not have the option to invoke the said provision. This brings us to the more fundamental question regarding the scope of aforesaid rule at the instance of the Respondent who is invoking the same. The scope and ambit of the aforesaid provision can be gathered from the remaining part of the said rule to the effect "may support the order appealed against on any of the grounds decided against him". A plain reading of the aforesaid expression indicates that a Respondent can support an impugned order on any of the grounds which were decided against him. Now, if we apply the aforesaid provision to the situation before us, we can easily discern that the Appellant-assessee- on the basis of Rule 27, was urging before the ITAT that the initiation of reassessment may be declared as invalid. Therefore, by invoking Rule 27, the assessee sought to support the final order of the CIT(A) in his favour, by assailing that part of the said order, wherein the CIT(A) upheld the initiation of reassessment under section 153C of the Act. We are, therefore, of the view that invocation of Rule 27 for challenging the

Page 14 of 19 ITA No. 606/Bang/2001 decision of the CIT (A) on the legal ground was well within the scope of Rule 27. The Appellant - assessee, as a respondent before the Tribunal was within its right to support the order under appeal before the Tribunal by attacking the grounds decided against him. It should nevertheless be borne in mind that Rule 27 cannot be invoked by a Respondent on an issue which is independently decided against him in the order appealed by the Appellant. In other words, if there is an issue, which is separately decided against a Respondent [in appeal], and the decision on the said issue has no bearing on the final decision of the CIT (A), then invocation of Rule 27 to challenge the correctness of the same cannot be sustained. Rule 27 and the provisions dealing with cross objections operate in separate fields, although there is certain overlap between them. Evidently, if cross objection is not filed, the Respondent would run the risk of being faced with a situation that it cannot succeed in getting anything over and above the order in appeal being confirmed. If the Respondent wants to assail an independent issue that has been decided against him in the order appealed by the Appellant, which has no bearing on the result of order impugned in appeal before the Tribunal, the appropriate remedy would lie in of filing a cross appeal or cross objection. In that event, as explained above, Rule 27 cannot be pressed into service to have the same upset or overturned. 21. Therefore, arguably Rule 27 has a limited sphere of operation, but this cannot be whittled or narrowed down to the extent, the Revenue would like us to hold. We cannot read Rule 27 in a restrictive manner to hold that the said provision can only be invoked to support the order in appeal and while doing so, the subject matter of the appeal before the ITAT should be confined only to the extent of the grounds urged by the Appellant. To read Rule 27 in this manner would render the said rule redundant as the respondent before the Tribunal would, even otherwise be entitled to oppose the appeal and raise submissions in answer to the grounds raised in the appeal that are pressed at the hearing of the appeal. With this clarity, we do not find any merit in the submissions of the Revenue that the assessee had accepted order of CIT (A), or that the issue of maintainability had attained finality. We also do not find that by such an interpretation, the scope of Rule 27 is expanded or that it would be contrary to section 253 (4), or that it would render the provision relating to cross objections redundant and otiose. In Sundaram & Co. (supra), the High Court observed that the reason for such a rule [Rule 27] was that when a decision is favorable to a person and comes to be challenged by his adversary, the person must be in a position to support the decision on every ground urged before the deciding authority whether or not it found favor, else such a person would be a victim of wrong reasons if no such freedom was given. In fact, the court has further held that even if Rule 27 as under the 1946 Rules had not been enacted, scope for invocation of the principle underlying the rule would still be possible based on principles of

Page 15 of 19 ITA No. 606/Bang/2001 natural justice. This is the essence of the proceedings in appeal before the ITAT which unfortunately has been completely ignored and, instead, the Tribunal has engaged itself in a totally irrelevant issue of the form and structure of the application. 22. Therefore, the position of law that materialises on a reading of the aforesaid decisions is that the appellant herein, (Respondent before ITAT) could have invoked Rule 27 to assail those grounds that were decided against him if those grounds/issues had a bearing on the final decision of the CIT(A). Revenue was certainly not taken by surprise as the appeal is considered to be continuation of the original proceedings. The ITAT had no discretion to deprive the appellant the benefit of the enabling Rule provision to defend the order of the CIT(A). The question of jurisdiction-which is sought to be urged by the Respondent while supporting the order in appeal, had a bearing on the final order passed by the CIT(A), because if the said issues were to be decided in favour of the appellant herein the assessee, that would have been an additional reason to delete the additions made by the A.O. 13. On the basis of the above discussion, in the instant case the Ld.CIT(A) decided the legal issue of reopening of an assessment against the assessee, but deleting the addition on merits in favour of the assessee. When the Revenue filed appeal against this order of the Ld.CIT(A) before this Tribunal, the assessee assailed the findings of the Ld.CIT(A) qua the deletion of addition on merits. Notwithstanding the fact that the assessee did not file any appeal against the order passed by the CIT(A), was still entitled under Rule 27 of the ITAT Rules, 1963, to support the conclusion of the order of the Ld.CIT(A), being the deletion of addition, by challenging the finding of the Ld.CIT(A) which was delivered against him on the legal issue of reopening of assessment. Respectfully following the above view, we admit the Application dated 02/01/2019, filed under Rule 27 of the Income Tax Rules 1963.

Page 16 of 19 ITA No. 606/Bang/2001 Now coming to the issue raised by assessee in the Application dated 02/02/2019, assessee is challenging the non issuance of notice under section 143(2) of the Act before completion of assessment. We have perused the submission advanced by both sides in light of records placed before us. 14. The crux of the issue is whether notice under section 143(2) is mandatory in a reassessment proceeding initiated under section148 of the Act. Hon'ble Supreme Court in the case of ACIT vs.Hotel Blue Moon reported in (2010) 321 ITR 362 held as under: 15. We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. Section 158 BC(b) provides for enquiry and assessment. The said provision reads “that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply.” An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the

Page 17 of 19 ITA No. 606/Bang/2001 Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of subsections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158 BC(b) specifically refers to applicability of the proviso thereto cannot be exclude. We may also notice here itself that the clarification given by CBDT in its circular No.717 dated 14th August, 1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of Section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the department that in view of the 16 http://www.itatonline.org expression “So far as may be” in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh’s case [1985] 155 ITR 166(SC). In this case, the Court has observed that Section 37(2) provides that “the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression “so far as may be” has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression “as far as practicable” has stated “without anything more the expression `as far as possible’ will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied.” 16) The case of the revenue is that the expression `so far as may be apply’ indicates that it is not expected to follow the provisions of Section

Page 18 of 19 ITA No. 606/Bang/2001 142, sub-sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply’. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143. 17) Section 158 BH provides for application of the other provisions of the Act. It reads : “Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter.” This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes Section 142 and sub-sections (2) and (3) of Section 143. 15. No doubt, if the income has been understated or the income has escaped assessment, the Ld.AO has power to issue notice under section148 of the Act. In completing the assessment under section148 of the Act, compliance of the procedure laid down under section143 and 143(2) is mandatory. As per assessment order, we find that there was no notice issued under section143(2) of the Act, which is essential for reassessment and it is a failure on the part of the Ld.AO for not complying with the procedure laid down in section 143(2) of the Act. 16. On multiple occasions this Tribunal directed the revenue to produce the assessment record. This is not done till date. The Revenue is silent on this factual matter till date. Hence we draw a conclusion that, the revenue could not rebut the factual submissions of the assessee, that no notice u/s 143(2). If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of the law and deserves to be cancelled.

Page 19 of 19 ITA No. 606/Bang/2001 17. In view of above facts and circumstances of the present case, the issue in dispute raised in application under Rule 27 relating to non-issue of the mandatory notice u/s. 143(2) of the Act deserves to be upheld. Accordingly the assessment order passed by the Ld.AO stands set aside and quashed. As the assessment order stands quashed, the appeal filed by the revenue stands dismissed as infructuous. Order pronounced in the open court on 24th March, 2022.

Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 24th March, 2022. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order

Assistant Registrar, ITAT, Bangalore